Former Aberdeen Standard Investments (ASI) G10 macro rates team Shayne Dunlap, Richard Marshall and Oleg Gustap were "trading inside a straitjacket" with their former employer and have embraced new found flexibility with Pacific Asset Management to outperform through recent market turmoil, the trio have said.
Investment directors Dunlap and Marshall, who ran a proprietary strategy together for Japanese bank Mizuho before joining ASI, and portfolio manager Gustap joined Pacific in September 2018, launching the Pacific G10 Macro Rates fund in early 2019.
Geographically, the fund focuses on the G10 nations and invests in liquid instruments, such as interest rate swaps, inflation products, derivatives and futures, and has a maximum FX exposure of 20%. It generally holds 20 to 30 positions at any given time.
Speaking to Investment Week, Marshall said that while the trio had "learned a lot" during their time at ASI, particularly with regard to experience with investors, "it was a little bit like trading inside a straitjacket".
He explained: "The prospectus we inherited was a very conservative one. It turned our style and our process into a rather unglamorous sort of cash-plus product."
Marshall said that with Pacific the team had a "much more entrepreneurial mindset", which better suits their "relative value mindset".
He added: "It has enabled us to take good quality risk, which generates returns in a diversified portfolio so that those returns can be generated in a wide array of markets.
"We can take risk across the whole of the maturity curve of the fixed income spectrum. We are sticking to exactly the same G10 rates and government bonds that we have always traded, but we are able to trade instruments with much shorter maturity [which allows for] trades that are exposed to moves by central banks and trades with exposure to the shorter end of the curve.
"That allows us to build a much more diversified book."
The G10 Macro Rates fund has delivered a positive return of 2.2% over three months to 14 May, amid falling markets, while peers in the Morningstar Alt-Macro sector have averaged losses of 3.3% over the same period.
Dunlap said the market outlook "for the foreseeable future" is "highly uncertain", which should put the strategy in a strong position.
He explained: "When you get these periods of increasing uncertainty, you get a very strong correlation with dislocations and pricing inefficiencies in the market.
"It is a great environment for a product like this to take advantage of effectively."